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Friday, March 29, 2013

Google opened its Shopping Express service on Thursday, offering same-day local delivery to a handful of retailers that want to test the service in the San Francisco Peninsula, from San Mateo to San Jose.

The company hopes to make it possible to get same-day delivery for items that consumers order online at a low cost.

An ecommerce marketplace will likely become the next step, according to Robert W. Baird & Co. Analyst Colin Sebastian. "As Google has continued to evolve its Commerce initiatives over the past three to four years, we noted that Shopping Express is a logical step in leveraging the company’s broad merchant and consumer relationships," Sebastian writes. "If successful, the new service could also compete more directly with Amazon (Prime shipping service) and eBay Now (eBay’s nascent local commerce initiative). Perhaps more importantly, we still see Google over time expanding toward a more traditional e-commerce marketplace model."

Through Shopping Express, consumers find what they need online, select a delivery window, and get it delivered the same day. The delivery model fits in with Google Shopping and product listing ads, but the real question becomes whether Google will begin leasing its driverless cars to make those deliveries.

Google isn't new to innovative ecommerce options. In November 2012, the company acquired Canadian-based BufferBox, physical lockers for online orders.

New York’s highest court rejected arguments Thursday by two Internet retailers that they should be exempt from collecting state sales tax.

Amazon.com, the biggest online store, and its much smaller competitor Overstock.com had separately sued to challenge a 2008 state law that required online retailers to collect sales taxes on purchases made by New York residents. That served effectively to raise prices on the sites by nearly 10 percent, reducing their competitive advantage against brick-and-mortar retailers.

In a statement, Amazon denounced the New York Court of Appeals ruling as conflicting with precedents by the United States Supreme Court and decisions by other state courts. Overstock said it was considering appealing to the federal Supreme Court.

Central to the dispute was the question of affiliates, which are independent sites that link to a retailer in return for a commission. Thousands of Amazon affiliates are based in New York.

“The bottom line is that if a vendor is paying New York residents to actively solicit business in this state, there is no reason why that vendor should not shoulder the appropriate tax burden,” the appeals court wrote in its decision. The suits had been dismissed by lower courts.

The struggle over Internet taxes has intensified in the last few years. Brick-and-mortar retailers have been increasingly insistent that Amazon in particular was unfairly avoiding its responsibility to make sure its customers paid sales taxes. Other states began debating measures like New York’s.

In response, Amazon struck deals in California, New Jersey and a few other states to build warehouses in exchange for finally agreeing to collect taxes. In states where it does not need warehouses, Amazon has generally refused to budge.

The retailer says it supports a national solution rather than a state-by-state effort. After many years of inactivity, progress is being made on that front, with a majority of United States senators indicating this month that they would support an Internet tax measure.

Wednesday, March 27, 2013

Story originally appeared on CNN.NEW YORK (CNNMoney) -- In one of the U.S. government's largest anti-piracy crackdowns ever, federal agents on Thursday arrested the leaders of and shut down Megaupload.com, a popular hub for illegal media downloads.Hours later, Megaupload's fans turned the table on the feds. "Hacktivist" collective Anonymous said it set its sights on the U.S. Department of Justice and apparently knocked the agency's website offline."We are having website problems, but we're not sure what it's from," a DOJ spokeswoman told CNNMoney.The DOJ website glitches came soon after various Twitter accounts associated with Anonymous took aim at the agency.Anonymous's favorite weapon for these attacks is what's called a "distributed denial of service" (DDoS) attack, which directs a flood of traffic to a website and temporarily crashes it by overwhelming its servers. It doesn't actually involve any hacking or security breaches."One thing is certain: EXPECT US! #Megaupload" read one tweet from AnonOps that went out mid-afternoon.One hour later, the same account tweeted a victory message: "Tango down! http://universalmusic.com & http://www.justice.gov// #Megaupload"It was the largest attack ever by Anonymous, according to an Anonymous representative, with 5,635 people using a networking tool called a "low orbit ion cannon." A LOIC is software tool that aims a massive flood of traffic at a targeted site.Universal Music's website also went down Thursday afternoon. The music company had been locked in a legal battle with Megaupload over a YouTube video that featured many of Universal Music's signed artists promoting Megaupload's site.The websites of the Recording Industry Association of America and Motion Picture Association of America went down Thursday afternoon as well. On Twitter, AnonOps -- one of the main communications channels for the leaderless Anonymous collective -- took credit for the crashes.An RIAA spokesman confirmed that the organization's website was intermittently offline. But he cast the attack as a minor hiccup."The fact that a couple of sites might have been taken down is really ancillary to the significant news today that the Justice Department brought down one of the world's most notorious file sharing hubs," he said.By Friday morning, all but one of the subjects of Anonymous' attack were back online -- including the FBI's website, Warner Music Group and the U.S. Copyright Office. Only Universal Music remained unavailable, as the company took the site down for "maintenance."A piracy crackdown: The Anonymous attack came soon after the DOJ announced the indictment of seven individuals connected to Megaupload for allegedly operating an "international organized criminal enterprise responsible for massive worldwide online piracy of copyrighted works."Authorities said the operation had generated more than $175 million in illegal profits through advertising revenue and the sale of premium memberships.According to the indictment, Megaupload, which launched in 2005, was once the 13th most visited website on the Internet, serving as a hub for distribution of copyrighted television shows, images, computer software and video games.The site's popular MegaVideo subsidiary was widely known in tech circles for its copious selection of pirated content, including recent movies and episodes of hit TV shows.Four of those indicted were arrested Thursday in Auckland, New Zealand, at the request of the U.S. Three others remain at large.The individuals indicted are citizens of New Zealand, Germany, Slovakia and the Netherlands. No U.S. citizens were named. However, Megaupload has servers in Ashburn, Va., and Washington D.C., which prompted the Virginia-based investigation.To shut down Megaupload, federal authorities executed 20 search warrants in eight countries, seizing 18 domain names and $50 million worth of assets, including servers located in Virginia, Washington, the Netherlands and Canada.The news comes as lawmakers have turned their attention to anti-piracy legislation. Protests erupted both online and offline this week against two bills currently under consideration in Congress: the House's Stop Online Piracy Act (SOPA) and the Senate's Protect IP Act (PIPA).The bills are aimed at cracking down on copyright infringement by restricting access to sites that host or facilitate the trading of pirated content. But the legislation has created a divide between tech giants, who say the language is too broad, and large media companies, who say they are losing millions each year to rampant online piracy.

Story originally appeared on CNN.There's a good chance your bank's website was attacked over the past week.Since Sept. 19, the websites of Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Wells Fargo (WFC, Fortune 500), U.S. Bank (USB, Fortune 500) and PNC Bank have all suffered day-long slowdowns and been sporadically unreachable for many customers. The attackers, who took aim at Bank of America first, went after their targets in sequence. Thursday's victim, PNC's website, was inaccessible at the time this article was published.Security experts say the outages stem from one of the biggest cyberattacks they've ever seen. These "denial of service" attacks -- huge amounts of traffic directed at a website to make it crash -- were the largest ever recorded by a wide margin, according to two researchers.Banks get hit by cyberattackers all the time and typically have some of the best defenses against them. This time, they were outgunned."The volume of traffic sent to these sites is frankly unprecedented," said Dmitri Alperovitch, co-founder of CrowdStrike, a security firm that has been investigating the attacks. "It's 10 to 20 times the volume that we normally see, and twice the previous record for a denial of service attack."To carry out the cyberattacks, the attackers got hold of thousands of high-powered application servers and pointed them all at the targeted banks. That overwhelmed Bank of America and Chase's Web servers on Sept. 19, Wells Fargo and U.S. Bank on Wednesday and PNC on Thursday. Fred Solomon, a spokesman for PNC, confirmed that a high volume of traffic on Thursday was affecting users' ability to access the website, but he declined to go into more detail.Denial of service attacks are an effective but unsophisticated tool that doesn't involve any actual hacking. No data was stolen from the banks, and their transactional systems -- like their ATM networks -- remained unaffected. The aim of the attacks was simply to temporarily knock down the banks' public-facing websites.To get hold of all the servers necessary to launch such huge attacks, the organizers needed to plan for months, Alperovitch said. The servers had to be compromised and linked together into a network called a "botnet."That level of pre-planning is a deviation from the kinds of denial of service attacks launched at banks in the past by so-called "hacktivists." Typically, hacktivists use home PCs infected with malware to amass their botnets. Attacks on this scale would be impossible to carry out with home PCs -- users too frequently turn them off or disconnect them from the Internet.The Islamist group Izz ad-Din al-Qassam Cyber Fighters publicly claimed responsibility for the attacks in what it called "Operation Ababil," but researchers are divided about how seriously to take their claims. The group has launched attacks in the past, but those have been far less coordinated than the recent batch.Sen. Joe Lieberman, an Independent from Connecticut, said in a C-SPAN interview on Wednesday that he believed the attacks were launched by Iran."I don't believe these were just hackers who were skilled enough to cause disruption of the websites," he said. "I think this was done by Iran ... and I believe it was a response to the increasingly strong economic sanctions that the United States and our European allies have put on Iranian financial institutions."A call requesting comment from the Department of Homeland Security's cybersecurity office was not immediately returned.A cybersecurity firm following the attacks also expressed doubt about the connections between the Cyber Fighters and the bank attacks. On social networks and chat forums, the group urged its followers to use a mobile "low orbit ion cannon" -- a software tool typically used by Anonymous and other hacktivist groups to direct a massive flood of traffic at a targeted site.That tool was not used in the attack, according to Ronen Kenig, director of security products at network security firm Radware."Supporters of this group didn't join in the attack at all, or they joined in but didn't use that tool," said Kenig. "The attack used a botnet instead." He doesn't think the Cyber Fighters would have access to a botnet as advanced as the one used by the attackers.But CrowdStrike's Alperovitch said he is "quite confident" the perpetrator was the Izz ad-Din al-Qassam Cyber Fighters, since they announced each attack well before it was carried out, and the attack wasn't that sophisticated -- it just took significant planning. PNC was the last target on the lists the Cyber Fighters have circulated, but more attacks could still be coming.Both researchers agree that the controversial anti-Muslim YouTube video was not the initial impetus for the attacks, as the Cyber Fighters claimed in messages recruiting volunteers to join in. Before the video was even released, the group claimed responsibility for similar attacks."The video is simply an excuse," Alperovitch said. "It's a red herring."

Tuesday, March 26, 2013

Eric Schmidt, the executive chairman of Google, said he regrets coming to the social media revolution late during his ten years as the company's CEO.

Schmidt, who stepped down as CEO in 2011, said he was proud of Google's achievements in the past decade.

"The source of pride for me personally is the power of information is so dramatic, that you really do touch people's lives when you give them the answers to the things they care about," Schmidt said in an interview with CNBC-TV 18 in India. "I can't think of a better way to spend a decade."

He added that his biggest mistake, however, was not seeing the social media revolution soon enough, something he took personal responsibility for. However, he said, that with Google Plus the company was well in touch.

While he admitted Google's late arrival on the social media stage meant Facebook and others had a clear head-start, Google Plus was ready to compete.

"The Google Plus link craft, the people you interact with, is an important future signal in our search ranking," he said. "I think it's important that Google be a player in all of the internet technologies."

The "Big Four"—of Google, Facebook, Amazon and Apple—compete all the time, Schmidt said.

Apple is threatened by Android, Amazon has rivals in the e-commerce space, Google has to fight off Microsoft and now Facebook has to battle with Google Plus, he added.

"The key thing for each of these companies is the rate at which they can continue to innovate to solve problems that really matter to the end-user," he said.

"It used to be that the industry was largely driven by the Microsoft monopoly structure in terms of PC hardware manufacturers, but that's completely broken down now by this new immersion of tablets and phones with many, many different choices. I think it's great," he added.

Discussing Google's future, Schmidt maintained his commitment to the importance of an open and accessible Internet, subtly referencing his recent trip to North Korea.

"It's natural for a politician to only want good coverage of himself or herself," Schmidt said. "What the Internet says is that you have to run your government more [openly]. You need to be honest; you need to tell people what you're doing; and you need to develop a trust through all the media which includes the Internet. The politicians that do that will do just fine. The politicians that try to shut down criticism will ultimately be booted out of office, at least in a democracy."

For Google, the future is bright due to two factors: Android and Google Glass — glasses that project information onto an eye lens, Schmidt said.

He said he was currently unsure what people would use the Lens for exactly.

"But we know that it will unleash a whole new set of applications for human behavior of one kind or another," Schmidt said.

Tuesday, March 19, 2013

Two of the country’s largest yellow pages companies filed for prepackaged Chapter 11 bankruptcy today, hoping to emerge as a single company by July. The two companies, SuperMedia and Dex One , announced their merger plans last summer and hope to save as much as $175 million a year as a result of combining their operations.

As anachronistic as a paper directory may seem in these days of Google and Yelp, the yellow pages are still active businesses. As I previously reported, publishers distributed 422 million directories in 2011. And despite their long decline, yellow pages still generate enough cash to entice some private equity and hedge fund investors. John Paulson’s hedge fund is one of the largest investors in SuperMedia, and AT&T last year sold a stake in its directory business—named simply Yellow Pages—to Cerberus Capital Management in a deal that values the unit at $1.4 billion.

That’s not to say there’s no risk in the companies, particularly for creditors. Both Dex and SuperMedia are quite familiar with bankruptcy. In 2009, Dex One, which was created out of the businesses of Sprint and the old Qwest Communications, went through bankruptcy to halve its $12 billion in debt. And SuperMedia was formed out of the 2009 bankruptcy of the directory business Verizon Communications spun off in 2006. That spinoff is still subject to litigation by creditors.

Matthew Stover, SuperMedia’s chief marketing officer, last year told me that “to be successful, anybody who has been in yellow pages needs to be in the local media business now.” That means transforming into a digital ad company that sells marketing services to small and medium-size business owners, helping them manage tasks like search engine optimization, and maintaining a presence on social networks. “If I am a heating and air condition person, when do I have time to do all of this?” Stover said. Directory companies have increased their digital revenue, but not quickly enough to counteract declining print sales. To expand the digital side, they’ll need to make some investments, from developing new technologies to training staff in social media marketing. Even for a leaner company emerging fresh from bankruptcy proceedings, those pressures and challenges aren’t going away.

Friday, March 15, 2013

(Reuters) - The resignation of Florida's lieutenant governor, Jennifer Carroll, and the arrests of 57 people charged with money laundering and racketeering has sparked a stampede in the state legislature to shut down hundreds of "internet cafes," whose online gambling operations have been allowed to skirt the law for several years.

While they try to distance themselves from the storefront sweepstakes, political leaders are also trying to scrub their campaign-finance reports of any contributions from companies associated with Allied Veterans of the World, the non-profit operation at the center of a massive fraud investigation.

Carroll's public relations company worked with Allied Veterans when she was a House member in 2009-10. She resigned Tuesday after being questioned by the Florida Department of Law Enforcement, though she has not been charged.

Internet cafes sell phone cards or internet access that customers can use on-premises, often to gamble online, playing electronic slot machines or poker, among other games. Winnings and losses are recorded on an access card, which can be cashed out when a player leaves an establishment.

Many city and county governments, including sheriffs, have called them "storefront casinos," but pleas for statewide regulation have gone unheeded.

That changed on Wednesday when Republican leaders, including Senate President Don Gaetz and House Speaker Will Weatherford, rushed to add internet cafe bills to the top of committee agendas.

Law enforcement officials alleged that Allied Veterans earned about $300 million over a four-year period while it served as a front for illegal gambling. The Oklahoma-based organization spent around $2 million on political donations over the same period.

Police shuttered 49 cafes in the sweep of arrests on Tuesday.

Republican Senator John Thrasher has already proposed a bill that would have stopped licensing of any more internet cafes. It is set for a hearing on Monday in the Senate Gaming Committee and is expected to be amended before then to outlaw the cafes.

"Even the internet cafes that are operating with the best of intentions are operating within a gray area of the law," said Adam Putnam, commissioner of agriculture and consumer services. "That should be resolved and, given the widespread nature of the corruption, I think it's best for the state of Florida to err on the side of a total elimination."

After announcing Carroll's resignation Wednesday, Governor Rick Scott ordered a thorough inspection of his own campaign-finance records to see if he has received any contributions from companies associated with Allied Veterans. Such funds will be donated to charity, he said.

On Thursday, Republican Party of Florida Chairman Lenny Curry of Jacksonville took the same action.

"In light of recent developments, RPOF is examining financial contributions that may be connected to any entities affiliated with the investigation and we are reviewing the most appropriate options," he said.

At least nine lobbyists and legislative advisers withdrew from representing International Internet Technologies, an internet cafe company investigators said provided technology to Allied Veterans to run the online games.

Tallahassee public relations woman Sarah Bascom said IIT was part of the Coalition of Florida's Internet Cafes, which her firm represented. She said the internet cafe lobbying "team" felt misled by the company.

"We had no knowledge of any of this until Tuesday, when the media reports started coming out (about arrests), and we terminated our representation of them immediately," she said.

SAN FRANCISCO (Reuters) - A federal grand jury indicted Matthew Keys, deputy social media editor at Reuters.com, of aiding the group Anonymous to hack into Tribune Co computers. The incident occurred prior to his employment by Thomson Reuters Corp, the indictment filed on Thursday indicated.

The indictment charged Keys with three criminal counts, including conspiracy to transmit information to damage a protected computer. The indictment alleged that other hacking targets were the Fox 40 television station in Sacramento, Calif. and the Los Angeles Times, both owned by Tribune.

Keys could not immediately be reached for comment. A Thomson Reuters spokesman said the company is aware of the indictment and added, "Any legal violations, or failures to comply with the company's own strict set of principles and standards, can result in disciplinary action. We would also observe the indictment alleges the conduct occurred in December 2010; Mr. Keys joined Reuters in 2012, and while investigations continue we will have no further comment." The company didn't specify whether any disciplinary action has been taken against Keys. A Tribune Co spokesman declined to comment.

In December 2010, members of Anonymous had a conversation online in which one expressed a desire to gain unauthorized access to Fox computer systems, the indictment says.

Keys, who once worked for KTXL Fox 40 as a web producer, identified himself as a former employee and gave them a username and password, according to the indictment.
Someone then used the information to log on to servers for Tribune Co, which is Fox 40's corporate parent. Shortly after, the indictment alleges, a member of the conspiracy altered content on a Los Angeles Times news story on the paper's website.

When Keys learned that the hacker had changed the Times story, Keys responded "nice," according to the indictment.

Keys is scheduled to be arraigned on April 12 in Sacramento, according to the court docket.

The case in U.S. District Court, Eastern District of California, is United States of America v. Matthew Keys, 13-82.

Wednesday, March 06, 2013

When Marissa Mayer took over as chief executive at Yahoo last summer, she confronted a Silicon Valley campus that was very different from the one she had left at Google.

Parking lots and entire floors of cubicles were nearly empty because some employees were working as little as possible and leaving early.

Then there were the 200 or so people who had work-at-home arrangements. Although they collected Yahoo paychecks, some did little work for the company and a few had even begun their own start-ups on the side.

These were among the factors that led Ms. Mayer to announce last week that she was abolishing Yahoo’s work-from-home policy, saying that to create a new culture of innovation and collaboration at the company, employees had to report to work.

The announcement ignited a national debate over workplace flexibility — and within Yahoo has inspired much water cooler conversation and some concern.

But former and current Yahoo employees said that Ms. Mayer made the decision not as a referendum on working remotely, but to address problems particular to Yahoo. They painted a picture of a company where employees were aimless and morale was low, and a bloated bureaucracy had taken Yahoo out of competition with its more nimble rivals.

“In the tech world it was such a bummer to say you worked for Yahoo,” said a former senior employee who, like many Yahoo insiders, would speak only anonymously to preserve professional relationships. The employee added, “I’ve heard she wants to make Yahoo young and cool.”

Restoring Yahoo’s cool — from revitalizing behind-the-times products to reversing deteriorating morale and culture — is hard to do if people are not there, Ms. Mayer concluded. That view was reflected in Yahoo’s only statement on the work-at-home policy change: “This isn’t a broad industry view on working from home. This is about what is right for Yahoo, right now.”

Yahoo declined to comment further.

On Monday, another ailing company, Best Buy, announced that it, too, would no longer permit employees to work remotely, reversing one of the most permissive flexible workplace policies in the business world.

Inside Yahoo, there has been mixed reaction to the policy change. Some employees said that they were able to be highly productive by working remotely, and that it helped them concentrate on work instead of the chaos inside Yahoo.

Brandon Holley, former editor of Shine, Yahoo’s women’s site, said she built the site and signed on big-name advertisers while she and most of her team worked from homes across the country.

“It grew very rapidly,” said Ms. Holley, who is now editor of Lucky, Condé Nast’s shopping magazine. “A lot of that had to do with the lack of distraction in a very distracted company.”

The change to the work-at-home policy initially angered some employees who had such arrangements, and worried others who occasionally stayed home to care for a sick child or receive a delivery. Reports that Ms. Mayer built a nursery for her young son next to her office made parents working at Yahoo even angrier.

This week, the policy continued to be the topic of much discussion at the company, as people wondered aloud whether they would lose that flexibility, said employees who spoke anonymously because they were not authorized to speak to the media.

But for the most part, those employees said, those concerns have been eased by managers who assured them that the real targets of Yahoo’s memo were the approximately 200 employees who work from home full time.

One manager said he told his employees, “Be here when you can. Use your best judgment. But if you have to stay home for the cable guy or because your kid is sick, do it.”

Many of Yahoo’s problems are visible to people outside the company. It missed the two biggest trends on the Internet — social networking and mobile. Its home page and e-mail services had become relics used by people who had never bothered to change their habits. It ceded its crown as the biggest seller of display ads to Facebook and Google. Its stock price was plummeting.

Inside the company, though, there were deeper cultural issues invisible from the outside. For Ms. Mayer’s ambitious plans to turn around the company to work, employees briefed on her strategy said, she believed Yahoo needed “all hands on deck.”

Jackie Reses, Yahoo’s director of human resources and the author of the new policy, is an extreme example of this philosophy. She commutes to Yahoo’s campus in Sunnyvale, Calif., from her home in New York, where she lives with her children.

“Morale was terrible because the company was thought to be dying,” said a former manager at Yahoo, who would speak only anonymously to preserve business relationships. “When you have those root issues, an employee work force that is not terribly motivated, it built bad habits over years.”

Yahoo has withstood many changes over the years, starting with a turnover of six chief executives in five years, each with his or her own deputies and missions for the company. This led to confusion among the work force about the company’s goals and frustration that projects would be pulled midstream by a new chief executive.

The company had hired many managers to oversee new tech products, but the extra levels of management slowed product development, former employees said.

“Where Yahoo competes, with companies like Facebook churning out a new release every single day, there was a lot of bloat slowing down product decisions,” the former manager said.

The new policy is the first unpopular big move Ms. Mayer has made. Yahoo insiders said they did not expect the employee and media outcry that followed.

Employees said that unlike previous chief executives, who focused outside Yahoo, she has prioritized fixing the company internally and motivating employees.

She introduced free food in the cafeterias, swapped employees’ BlackBerrys for iPhones and Android phones and started a Friday all-employee meeting where executives take questions and speak candidly.

A recent internal employee survey found that 95 percent of employees were optimistic about the company’s future, a 32 percent bump from the previous survey, Ms. Mayer said in a call with analysts in January.

Résumés have begun arriving from employees at competitors like Facebook and Google, which rarely happened in the past, according to one person briefed on Yahoo hiring.

Since Ms. Mayer made food free, there are now crowds in the cafeterias, lingering to talk about new ideas, employees say — exactly what she wants to encourage by requiring people to work in the office.

Monday, March 04, 2013

The lower house of the German parliament, known as the Bundestag, has approved a new bill that would require search engines to pay a license fee for re-publishing content longer than "individual words or short excerpts." The bill passed by a vote of 293 to 243, with three abstentions.

However, the law does not define exactly what such a “snippet” would entail. For the law to take effect, it would need to be ratified by the upper house of the German parliament, the Bundesrat. By all accounts, this bill is a watered-down version of what had originally been lobbied for by the German publishing and media industry.

Not surprisingly, Google has opposed this law and proposals like it in neighboring France.

“As a result of today’s vote, ancillary copyright in its most damaging form has been stopped,” Google said in a statement. “However, the best outcome for Germany would be no new legislation because it threatens innovation, particularly for start-ups. It’s also not necessary because publishers and Internet companies can innovate together, just as Google has done in many other countries.”

Still, the publishing industry seems to be fairly satisfied that they managed to get something passed through the Bundestag.

“With the right legal conditions and the technical tools provided by the Linked Content Coalition, it will be easy to access and use content legally,” the European Publishers Council said in a statement (PDF) on Friday. “This will mean that publishers will have the incentive to continue to populate the internet with high-quality, authoritative, diverse content and to support new, innovative business models for online content.”

Friday, March 01, 2013

Groupon CEO Andrew Mason was handed a pink slip Thursday, fired after the company reported disappointing fourth-quarter results along with a dim outlook.

"After four and a half intense and wonderful years as CEO of Groupon, I've decided that I'd like to spend more time with my family. Just kidding – I was fired today," Mason said in an email to employees announcing his departure.

"If you're wondering why… you haven't been paying attention," he added. (Read the full text of the email below.) Groupon shares shot up more than 10 percent following the news.

The stock has fallen more than 75 percent since its November 2011 IPO. In regular trading Thursday, the stock fell 25 percent after the disappointing fourth-quarter results came out late Wednesday.

The results revealed that the company has had to slash its fees from merchants to grow its business and that its new Groupon Goods business would decline in the first quarter. Mason was so confident on the earnings call, he drew criticism of being entirely out of touch. Twenty-four hours later the guillotine fell.

Groupon has not yet announced his successor but said Executive Chairman Eric Lefkofksy and Vice Chairman Ted Leonsis would serve as co-CEOs until one is found.

"This company outgrew Andrew, his vision notwithstanding. The company has different challenges now. It's in a different stage of its life and requires a different team," said Stern Agee Analyst Arvind Bhatia, who has a rare "buy" rating on the stock.

"For a company that's doing $5 billion in billings, they're not generating that much profit and I think there's an opportunity for somebody to come in and improve their margins over time," Bhatia said.

Here is the full text of Mason's email to Groupon employees:

People of Groupon,

After four and a half intense and wonderful years as CEO of Groupon, I've decided that I'd like to spend more time with my family. Just kidding – I was fired today. If you're wondering why… you haven't been paying attention. From controversial metrics in our S1 to our material weakness to two quarters of missing our own expectations and a stock price that's hovering around one quarter of our listing price, the events of the last year and a half speak for themselves. As CEO, I am accountable.

You are doing amazing things at Groupon, and you deserve the outside world to give you a second chance. I'm getting in the way of that. A fresh CEO earns you that chance. The board is aligned behind the strategy we've shared over the last few months, and I've never seen you working together more effectively as a global company – it's time to give Groupon a relief valve from the public noise.

For those who are concerned about me, please don't be – I love Groupon, and I'm terribly proud of what we've created. I'm OK with having failed at this part of the journey. If Groupon was Battletoads, it would be like I made it all the way to the Terra Tubes without dying on my first ever play through. I am so lucky to have had the opportunity to take the company this far with all of you. I'll now take some time to decompress (FYI I'm looking for a good fat camp to lose my Groupon 40, if anyone has a suggestion), and then maybe I'll figure out how to channel this experience into something productive.

If there's one piece of wisdom that this simple pilgrim would like to impart upon you: have the courage to start with the customer. My biggest regrets are the moments that I let a lack of data override my intuition on what's best for our customers. This leadership change gives you some breathing room to break bad habits and deliver sustainable customer happiness – don't waste the opportunity!